Assemblyman Min Hyung-bae: "13.4~75.1% of Securities Firms' Clients Have Ultra-High Risk Profiles"

[Asia Economy Honam Reporting Headquarters Reporter Yoon Jamin] The proportion of ultra-high-risk customers varies greatly among securities firms. The gap ranged from a minimum of 13.4% to 71.5%. There are calls for financial authorities to specifically establish and supervise the risk rating calculation methods.

According to data on the ‘Status of Customers by Risk Propensity of the Top 10 Securities Firms’ received by National Assembly member Min Hyung-bae (Democratic Party of Korea, Gwangju Gwangsan-eul) from the Financial Supervisory Service, as of the end of June, the average proportion of ‘ultra-high-risk’ propensity customers among the top 10 domestic securities firms was 22.3%.

According to the Korea Financial Investment Association, ultra-high-risk propensity investors are classified as suitable investors for high-risk products such as speculative-grade corporate bonds, stock-related bonds, highly volatile funds, principal non-guaranteed equity-linked securities, and derivative-linked securities. This means they are customers to whom securities firms can sell high-risk products.

While the proportion of ultra-high-risk customers may vary by financial company, the difference ranging from the 10% level to the 70% level is considered unreasonable.

The securities firm with the highest proportion of ultra-high-risk customers was Hana Financial Investment, where 75.1% of the 21,349 customers whose investment risk propensity was identified?16,025 customers?were classified as ultra-high-risk.

Korea Investment & Securities (54.8%) also had more than half of its customers judged as ultra-high-risk. The other securities firms had less than 40% of customers classified as ultra-high-risk.

Each securities firm classifies investor types based on investor information confirmed according to the ‘Standard Investment Solicitation Guidelines’ established by the Korea Financial Investment Association. Most financial firms, including securities firms, classify the risk ratings of financial investment products by directly citing the provisions and examples of these guidelines, which were established in 2009, without separate detailed evaluation procedures.

The problem is that the questions for investor information confirmation, scoring criteria, and investment suitability judgment methods can be autonomously determined by each company. This allows for discretionary judgment by financial firms in identifying high-risk investors.

With investor risk propensity judgments varying by securities firm, the current financial investment business regulations that prohibit contracts for asset types unsuitable for investor types are becoming ineffective.

Especially since next year it will be legally mandatory for sellers to explain investment product risk ratings clearly to consumers, there is a call for objective rating calculations. The EU (European Union) specifies detailed risk rating calculation methods in financial authority regulations.

Assembly member Min Hyung-bae said, “Cases where securities firms instruct or induce customers to confirm risk propensity with the goal of subscribing to risky products are frequently occurring in the field,” and added, “Financial authorities need to specifically establish and supervise the risk rating calculation methods.”

This content was produced with the assistance of AI translation services.